Oberoi Realty makes the right moves to woo investors

The company's stock has rallied by an impressive 60% this year but it still lags the Nifty Realty index, albeit marginally
The company's stock has rallied by an impressive 60% this year but it still lags the Nifty Realty index, albeit marginally

Summary

  • The company recently announced the launch of its luxury residential project Forestville in Thane, near Mumbai, and forayed into the National Capital Region by acquiring a 14.8-acre plot valued at 597 crore in Gurugram

Oberoi Realty Ltd has grabbed investors' attention of late, and for all the right reasons. Shares of the Mumbai-based real estate developer climbed to a new 52-week high of 1,415 on 21 November in response to two crucial developments.

The company announced the launch of its much-awaited luxury residential project Forestville in the Kolshet area of Thane, near Mumbai. The project will be spread across 18 acres and consist of five residential towers, predominantly with 3-BHK apartments starting at 1.87 crore. Recall that the delayed launch of Thane projects (Kolshet and Pokhran) was seen as an overhang for the stock. The Pokhran Road project is now expected to be launched in Q4FY24.

The company has also forayed into the National Capital Region (NCR) by acquiring a 14.8-acre plot valued at 597 crore in Gurugram from Ireo Residences Company Pvt Ltd and others. It plans to develop a luxury group housing project there. At a time when its peers are expanding their footprint, geographical diversification is certainly a positive for Oberoi Realty.

Gaining grip
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Gaining grip

These developments followed a muted September quarter (Q2FY24) for the company, during which its year-on-year pre-sales growth was affected by a lack of new launches. So, the excitement among investors is understandable as these developments are expected to boost its near-term growth.

Analysts note that location of its Gurugram plot is likely to be favourable for a luxury project in terms of pricing and demand. “The land is adjacent to the Grand Hyatt and a retail component developed by erstwhile developer Ireo, which will enhance the value of Oberoi’s residential development," said Motilal Oswal Financial Services in a report dated 20 November. That said, more clarity on timelines and pricing is needed to gauge the impact on Oberoi’s pre-sales growth.

The company's stock has rallied by an impressive 60% this year but it still lags the Nifty Realty index, albeit marginally. A meaningful upside from current levels depends on the pace of launches and inventory exhaustion for existing projects. In the Q2 earnings call, the management said it planned to launch new phases in the Elysian and Borivali projects in the second of of FY24, and that the Borivali mall, Commerz III and the Ritz Carlton hotel should be commissioned in CY24. It also said it expects to sell its entire inventory in the Mulund projects in the next two years.

A comforting factor is that the company's net debt eased sequentially in Q2FY24, aided by robust cash flows. That said, aggressive business development deals and new land acquisitions could increase its debt.

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